THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

RICHARD QUEST, CNN INTERNATIONAL ANCHOR: It's a franc response. The Swiss central bank chief says he will not resign.

Europe may be powerless to solve its problems, the view from Goldman Sachs' Jim O'Neill.

And heading for a photo finish, Kodak's survival plan.

I'm Richard Quest. I mean business.

Good evening.

In Zurich, Cesar's wife is under suspicion and Cesar is fighting for his career. Philipp Hildebrand is the head of the Swiss National Bank and said today, he won't step down as he faces a crisis of confidence because of a massive currency trade made by his wife. Kashya Hildebrand made more than $60,000 from the deal and critics say there is an unacceptable conflict of interest.

As Diana Magnay reports, Mr. Hildebrand says he's behaved impeccably.

(BEGIN VIDEOTAPE)

DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: Philipp Hildebrand said that whatever he had done, it had been within the law and that there was no question of him stepping down from his post as governor of the Swiss National Bank.

This, in a very lengthy press conference, given to respond to allegations that a trade made by his wife, a currency trade made by his wife, in August last year had been tantamount to insider dealing. Let's just have a listen to what he said.

PHILIPP HILDEBRAND, CHAIRMAN, SWISS NATIONAL BANK (through translator): I have at every point not only conformed with the rules, but also acted correctly. My behavior has been at all times transparent. All I can say, in all honesty, I was unaware of any wrongdoing.

MAGNAY: So what was this all about? Basically, in August last year, Kashya Hildebrand, who was formerly a currency trader herself, bought dollars at a time when, in her words, the dollar was "ridiculously cheap". And subsequently netted a $60,000 profit by their sale. This was about at the time that the Swiss National Bank was intervening heavily in the currency markets to try and prevent these Swiss franc from strengthening to the detriment of the Swiss economy and of Swiss exporters.

Now, Hildebrand, himself, said he did not know about his wife's transactions until the subsequent morning at which point the informed the supervisory board of the bank that this had taken place. And also, instructed his bank manager to not put through those kind of transaction without informing him in the first place. All of which, he said, was totally above board and in accordance with the policy of the Swiss National Bank.

What he did say, though, was that one lesson did have to be learned out of all of this, that top officials at the bank would have to submit their financial dealings to a much greater level of supervision, to generally be much more transparent. Obviously, quite a difficult thing in a country which has really established its banking system on a code of secrecy. Diana Magnay, CNN, Berlin.

(END VIDEOTAPE)

QUEST: The Swiss National Bank has printed and published its code of ethics. A code that will now no doubt have to be rewritten. Philipp Hildebrand has criticized the way his rivals tried to exploit this deal for political gain. His critics are still far from satisfied by today's press conference and say action needs to be taken.

I spoke to Hannes Germann, of the Swiss People's Party, that is the largest party in Switzerland's ruling coalition. I asked Herr Germann if he was satisfied with what the president said today.

(BEGIN VIDEO CLIP)

HANNES GERMANN, SWISS PEOPLE'S PARTY: No, I am not satisfied at all. We heard today a lot of explanations, but I couldn't see the large clearance (ph) or the (UNINTELLIGIBLE) either for Mr. Hildebrand nor for the SNB.

QUEST: What is your fundamental problem? Because it seems to me that the head of the bank is at best guilty of just bad judgment if his wife chooses to make this trade. No one is seriously suggesting that she knew that he was going to do this, an insider trading, are they?

GERMANN: Yes, you are right, it doesn't make a difference. You know the positive thing is the law has not been violated by the transaction on the Hildebrand family. That is positive, but Hildebrand said he would not anymore act in the same way.

Now he would immediately call back the transaction ordered by his wife, three weeks before announcing the minimum exchange rate of 1.2 francs, versus the euro, with unlimited currency purchases. The exchange rate, we know it shoot up immediately and the family gave the gain on the transaction to a welfare organization. But he did not answer why it is necessary to buy and sell U.S. dollars in order to sell a holiday house in the region of Burn (ph) and half a year later to buy a leisure residence in another part of Switzerland.

QUEST: OK, so-

GERMANN: So, these questions have not been answered.

QUEST: No, but we know that his wife a banker, or a trader, or has been in the past. I mean, is this not a case where politics is by far and away driving the issue? People who want to find a reason to bash the SNB and the Hildebrands.

GERMANN: Yes, of course, policy now has to act. We have to maybe we have to change the rules, but you know in Switzerland we have said the Swiss National Bank has to be independent and that is the best way to make a good monetary policy. And that is the mission of the SNB, but now we have a serious problem, I am-we are fighting against a decline of confidence opposite to the SNB, and I'm afraid it is not over yet. So, we have to act, but first it is, maybe, it is the federal accounts, it is the members or the board of directors that have to act.

(END VIDEOTAPE)

QUEST: Now, one of the postscripts to that story, the banker from Hildebrand's bank, who leaked the story of the transaction has actually been fired for revealing that information.

As for the dollar, the rate at which she did the exchange, well, of course, the dollar has considerably moved in the opposite direction, as a result of what he Hildebrand and what the Swiss National Bank, I should say, moves that they took.

Coming up next, it is another fight. This time against fraud to save the Spanish economy. Spain is planning an almighty crackdown on its tax dodgers.

And we'll hear what Jim O'Neil, of Goldman Sachs , makes of the euro crisis at the moment. QUEST MEANS BUSINESS, good evening.

(COMMERCIAL BREAK)

QUEST: Spain's new government is coming to collect. Lawmakers out to get more than $10 billion in their anti-tax fraud initiative. It is a crackdown on corruption and it follows the government announced spending cuts. Tax hikes were $20 billion. It is all part of the austerity as Spain fills a yawing gap in its budget. The deputy prime minister says the situation is serious and warrant extraordinary measures.

(BEGIN VIDEO CLIP)

SORAYA SAENZ DE SANTAMARIA, SPANISH DEPUTY PRIME MINISTER (through translator): There will be no problem, pensions will be paid, but this situation is very reminiscent of what we lived through in 1996. And that government took on the situation and made timely payment of pensions. And the same will be done here.

But this shows us that this country needs extraordinary measures because the situation is extraordinary. The reality is more difficult than we had thought. As will be the measures that must be adopted.

(END VIDEO CLIP)

QUEST: CNN's Al Goodman joins us now from Madrid.

Al, we talk about this frequently. So, we have had the tax cuts, or the spending cuts, we've had the tax rises, now we are getting the clamp down on the tax cheats. Familiar ground as the country's austerity bites.

AL GOODMAN, CNN INTERNATIONAL CORRESPONDENT: Indeed, Richard, and let's see whether they are really serious this time because you know, cash is really an important part of the Spanish economy. A former labor minister, under the previous Socialist government said, the underground economy here was 16 to 20 percent of the overall functioning of the economy.

And these are just 50s, 500 euro bills, which I don't happen to have any right now, are the big problem. And that is what they are going to go after. So they are going to limit some cash transactions, reports say it might be 1,000 to 3,000 euros, in cash for certain types of transactions.

They are going to check energy use for factories. They are going to check credit cards. They say they're really going to get serious. But Spaniards have heard this before, you're alluding to that. So, we'll have to see, Richard.

QUEST: All right. Al Goodman, who is in Madrid tonight.

And, Al, you and I will talk more about Spain's austerity. Keep us informed on now the honeymoon period of the Rajoy government continues.

There are fresh fears about the health of Europe's banks, which sends a chill through the region's major stock indices. Spanish and Italian benchmarks were amongst the worst hit in Milan. Italian lender, UniCredit, plunged 17 percent after sinking nearly 15 percent on Wednesday. All this anxiety pushed the euro below a $1.28 for the first time in some 16 months.

The scramble for cash continues in Europe. It was France turn today. The country of France to face the bond market. And the Greek government issued a warning and Hungary made a pledge. And if you look at the deck, I'll show you what happened.

France, we had the EFSF, we had France, we had a bond auction, and it was the first big, real test of 2012. Now, French borrowing costs rose. They paid an average rate of 3.3 percent for 10-year bonds. It is marginally up from 3.2 percent a year ago. Demand and cover was solid and that will be the important part as we consider whether or not France is at danger of risking losing its AAA credit. Triple A-excuse me, demand for EFSF inaugural's three-year bond.

One other bond note, Italy's rate is now over 7 percent.

Wind the deck: The debt to Greece, where Greece is warning. The prime minister says the country faces immediate risk of default in March, if Athens fails to finalize its bailout. Lucas Papademos says the coming weeks are extremely crucial, my reading of this is ratcheting up the temperature on the negotiations with the banks as they played their part in the second bailout negotiations. Forcing more banks to actually agree to the 50 percent haircuts.

Wind the deck: Hungary, we talked about it, you and I, last night. And Hungary is promising to take a quick deal with the IMF, as it tries to calm its own escalating financial crisis. The EU is still talking tough. Says negotiations won't resume. Hungary says the IMF is about to start talking again. The IMF says nothing of the kind. Bond rates are over 10 percent. And as things continue with Hungary, the situation deteriorates even further.

Jim O'Neill is chairman of Goldman Sachs Asset Management. He told me that Europe won't be able to pull itself out of the crisis; probably not, under its own steam.

(BEGIN VIDEOTAPE)

JIM O'NEILL, GOLDMAN SACHS ASSET MANAGEMENT: Part of me wonders why it is just suddenly flat up again, it is almost like a drug that the markets just can't put down. And it has today dominated everything. In the U.S. you have had some great numbers out. Last time I saw S&P is down 0.5 a percent. It is all because of this European thing. So we can't get rid of it.

I wonder, I said to you off air, that I didn't want to talk about Hungary, because I know nothing about it. I wonder whether the Hungary thing, in a broad sense is the new news. In that it is the gang demonstrating the impotency of Europe's leaders. Because, you know, shouldn't they just say to Hungary, if you aren't going to listen to what we are saying you've got to do, we don't want you in it? Maybe it is the markets realizing that the slowly broadening dilemma is of a such a dimension, it is really difficult to get away from.

QUEST: If you are right on that, then unless another train, locomotive, pulls Europe out of it, they can't solve this themselves, no matter what they do. Unless the U.S. growth puts things right, or China's growth will put things right.

If Europe, under its own steam, cannot put this right?

O'NEILL: I don't think they can. It is not-without a level of leadership from the ECB, that looks, maybe with some justification, they can, or certainly don't want to give, it is increasingly looking like Europe can't solve this itself. And it may have to require some money from the rest of the world, I don't know?

Amongst the things which are so interesting, to the start of the year, we're only three days into it, of course, is-as I-one of the few things I've gotten right in the past few months, is the thing I said the last time I chatted with you in another part of the world. The U.S. is showing signs of being stronger.

QUEST: Let's talk about that.

O'NEILL: Hmm.

QUEST: Manufacturing numbers were better. Unemployment, today's employment data-all right, it is a swallow and I'm making a summer, but it is looking better. So what is driving this better U.S. output, do you think? Cheap money?

O'NEILL: I think there is a combination of a few things, which means, if I'm right, it has more legs than people realize. It is definitely cheap money. It is also, I suspect, vastly improved U.S. competitiveness over the years. So, you hear stories of companies pulling back from China, to the U.S. Because it is, you know, why be there when they're putting up wages 20 percent every year, and it is cheap here. And then, at the margin, I smell more and more signs of a housing market turning, too.

QUEST: Really?

O'NEILL: Yes, yes. So, I've had-

QUEST: If that happens, then the U.S. markets, and of course the Dow was the only one that rose last year, of the major markets. Up 6 percent. If that happens we could be off to the races.

O'NEILL: Oh, yeah. If that happens it's a biggie. Because that is of course, at the core of why the banks have been in so much trouble. And so, I think the U.S. story is hugely interesting. Of course, so many analyst, because of this European drug, are worried about Europe dragging down the U.S. What you hinted at, in a different way perhaps than what you meant, could end up being relevant. Can the U.S. help lift Europe out of this mess? Maybe it can. We'll see.

QUEST: We'll hear from Jim later in the program and why he thinks the European crisis can't derail the BRICS economic momentum.

One of the architects of the euro says the European Central Bank was aware of the problems with the single currency from the beginning. He told me he would rather see Greece go bust and that the current crisis was inevitable.

(BEGIN VIDEO CLIP)

OTMAR ISSING, FORMER MEMBER, EXECUTIVE BOARD OF THE EUROPEAN CENTRAL BANK: I think strengthening the pact has to have national roots. I think this is key. The problems, the cause, at the national level, the problems have to be solved at the national level.

QUEST: While some are very much beating up on the markets, you are basically saying, the markets have a role to play in keeping them honest?

ISSING: Absolutely. Absolutely. And markets have failed for many, many years. Italy, Greece, even Greece enjoyed almost the same low, long- term interest rates as countries like Germany. So, this was a market failure.

(END VIDEO CLIP)

QUEST: Professor Otmar Issing, and you can hear the entire interview for yourself in 20 minutes, in "MARKETPLACE EUROPE" as he once again says this was a crisis that was building for years, that they knew about in the pipeline.

The inventor of the digital camera is struggling to survive in the digital age. Kodak's dark moments-(DESK BELL CHIMES)-after the break.

(COMMERCIAL BREAK)

QUEST: Kodak is in trouble. Rumors are flying over the past few years, that the company is close to filing for bankruptcy protection. Kodak has lost three directors from the board, in the last week. Is scrambling to sell patents in a last ditch effort to plug its financial holes.

Even the New York Stock Exchange has threatened to delist Kodak, from the Big Board, if the stock price doesn't recover. It has been under a $1a share for too long. Felicia Taylor is outside, in New York.

Felicia, now, what is wrong with Kodak? And why can't they put it right?

FELICIA TAYLOR, CNN BUSINESS CORRESPONDENT: Well, you know, it is a classic example of a company that hasn't gone with the times. It hasn't actually rolled forward in what it is mean to be doing.

The company started back in 1878, by George Eastman, and he had the original dry, gelatin plate. OK, but then they became known for the Browne camera in 1900, but what we really remember Kodak for is film. And that is what gave us the infamous Kodak moment. You know, capturing loved ones and children in moments in time that we could use for our scrapbooks and memory books.

But that was the problem. They had foreign competition and they could no longer capture that film market and that is where they went wrong.

They also invented the digital camera in 1975. But again, that software, which they had put into the digital cameras has not been an area for them that they have been able to capitalize on. They have used those licenses, which is what these patents that they are looking to sell, in many different smart phones. Anytime you take a picture, on a smart phone, you are using that software potentially, from Kodak.

So what they want to do is to be able to sell these patents. And there are 1,1000 of them. The question, though, is about price. Will they get the dollar amount that they actually want? One expert isn't so sure.

(BEGIN VIDEO CLIP)

RICHARD EHRLICKMAN, PRESIDENT, IP OFFERINGS: I believe that the sale of the patents will occur. And it will come down to price point. You know there is no question that are interested parties, but it is all about the price point. Is it $500 million? Is it $1 billion? And I don't think it is $3 billion.

Potential buyers are companies that are currently-the easiest one to think about are companies that are no licensed. So, Apple, RIM, are not licensed, in a litigation, if they buy the patents, ends the litigation, in addition they own these patents and assets. And then they can determine how best to monetize them. Another huge buyer in the space is Google.

(END VIDEO CLIP)

TAYLOR: Mr. Ehrlickman alluded to a huge number, some $3 billion, which is the rumored price that Kodak is willing to get for those patents. He actually thinks they are going to get something like $500 million. So there is a huge difference.

The point of this bankruptcy filing, if it does happen in the next few weeks. Is that Kodak would no longer have to pay health care benefits or pensions to its employees. And that would save them $100s of millions a year. Shareholders are not happy with the way things are-with the way Kodak is treating this however. The stock is down about 5 to 6 percent today, to 44 cents a share, Richard.

QUEST: OK. Felicia, patent sales are all fair and good. And they raise revenue, but basically selling the family jewels is a short-term road to disaster. Stay with me for one moment.

Look at this. When you talk about selling the family jewels, it is not the first time we've seen this. Pan Am, the airline did it. Sold its Pacific routes and its Atlantic routes to United. TWA did the same thing. They sold their routes to American Air Lines. Asset sales, they both ended up going out of business.

Same again with Woolworth's. Woolworth's with the luncheon counter. Not that Felicia Taylor would remember the luncheon counter at Woolworth's. But the fact is they were there. They didn't move with the times. They also suffered. They went out of business.

AT&T got broken up in 1984, from the Baby Bells, never really managed to recover. Ended up merging, being taken over by SBC. Today's AT&T is not the AT&T that it was back then. Not even to where its headquarters are.

Finally, the South Sea bubble, in the 1700s, another example. 1720, Isaac Newton asked about the rise in the stock price. He was told, you cannot miscalculate on the madness of people.

Back to Felicia Taylor. The history of this is clear. Assets sales, whether it is routes from airlines, or patents from Kodak. What is their strategy for profitability?

TAYLOR: That is exactly the point. They haven't concentrated on what has been their core businesses. And now under its latest CEO, Mr. Perez, who has been there since 2005 or 2006, he was the head of printing at Hewlett-Packard. And that is what they have been concentrating on. He is counting that the printing business for Kodak, which is exactly what we don't know Kodak for, is going to be their ticket to the future. Not everybody is so sure.

But now, I think, the South Sea Company, did go on for another 100 years, Richard, didn't they? After that South Sea bubble?

QUEST: After the South Sea bubble-

TAYLOR: Yes, or no?

QUEST: Yes, but they are not with us today! My point is-my point is-

TAYLOR: No, of course, not.

QUEST: My point is, Felicia, that the world is replete with companies that started selling assets, didn't have a realistic plan and eventually bite the dust.

TAYLOR: Yes. There is not question about it. I couldn't agree with you more. Kodak hasn't concentrated on what it has been known for. It lost its share hold of the film business. So, going into printing is not going to be the ticket for Kodak to survive another 130 years.

QUEST: Which is more than Felicia Taylor and myself will survive. Felicia, many thanks indeed. Good to see you tonight, out in New York.

A quick look at the markets, down 5 points, barely worth talking about. We shall move on. Wall Street moving along, half an hour left to go to the close. We'll take you to Wall Street after the break.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest.

More QUEST MEANS BUSINESS in a moment.

This is CNN. And on this network, the news always comes first.

Burned our wreckage and shocked bystanders after a string of deadly bombings in Iraq. At least 60 people were killed in parts of Baghdad and in the southern city of Nasiriya. The attacks were targeting Shias, who are preparing for Arbaeen, one of the holiest days for Shiite Muslims.

President Barack Obama has just announced plans for a somewhat smaller and less expensive American military. The strategy follows an eight month review of U.S. defense forces. The new plan limits America's ability to fight two wars at the same time, but it does include a new emphasis on the Asia-Pacific region.

Egypt's former president heard prosecutors in his trial on Thursday call for his death. The chief prosecutor ended his three day presentation with a demand that Hosni Mubarak and five others be hanged. Mubarak is charged with ordering anti-government protests to be killed. It's an accusation that he strongly denies.

The Arab League is admitting mistakes have been made in its observer mission to Syria and is asking for technical help from the United Nations. Meanwhile, a former Syrian defense ministry official has told CNN he saw protesters detained, tortured and shot by security forces before he defected to Egypt.

Airbus has confirmed that it has found small cracks in the wings of some of the A380 super jumbo jets. "The Sydney Morning Herald" reports reported the cracks were first found in the aircraft that suffered the engine blowout over Singapore in 2010. More planes were late found to be affected. Airbus says it has traced the origins of the cracks and says, in their words, "They are non-critical and do not affect plane safety."

Wall Street is still trying to claw back gains, barely moving. It's had a rough ride for most of the session, the ongoing Eurozone debt worries. And this managed to trounce the good news that existed on jobs. Private sector payrolls swelled in December and weekly jobless claims fell by 15,000.

To New York. Alison Kosik at the New York Stock Exchange.

Two pieces of good news on the jobs front, as we anticipate the full jobs report.

ALISON KOSIK, CNN CORRESPONDENT: Exactly. But the headline number came from ADP. That's the payroll processor, Richard. So that 325,000 private sector jobs were added in December. That sounds great but what you're seeing play out in the markets, you know, you're not seeing that enthusiasm that you'd expect. It's because there's a little skepticism. There was some seasonal -- there is some question whether or not there were some seasonal discrepancies in that number.

So you've got a little skepticism about the number.

Many people on Wall Street, Richard, really consider this just an appetizer before the government's official tally. That comes out Friday morning.

But you know what, either way you look at it, you're going to see job additions in the private sector based on this ADP number.

One other thing that investors are looking at when they see this number, Richard, is that ADP and the government, they don't always get it right, meaning together. ADP is only right some of the time. It's missed in either direction over the past couple of months.

So, you know, a lot of traders think, you know what, we're going to take this number with a grain of salt and wait for Friday's report -- Richard.

QUEST: OK. Alison Kosik at the New York Stock Exchange.

Alison, many thanks for that.

And, of course, you and I will talk tomorrow...

KOSIK: Sure.

QUEST: -- when we get that Friday number.

Appreciate that, Alison Kosik.

We'll be hearing more from Jim O'Neill next. Stay there. We'll have his thoughts on why emerging markets are still the ones to watch and why the crisis in Europe isn't going to change much.

(COMMERCIAL BREAK)

QUEST: As the crisis in Europe escalates, there are worries that the emerging markets could be sucked in.

Earlier on the program, we heard from Jim O'Neill, the economist, of course, who came up with the whole concept of the BRIC nations.

He told me that even with the problems in Europe, emerging economies are the driving force of our destinies this decade.

(BEGIN VIDEOTAPE)

JIM O'NEILL, CHAIRMAN, GOLDMAN SACHS ASSET MANAGEMENT: The mood about Europe has got so depressed that the people are now starting to think it might destroy the emerging markets totally, too.

But I don't share that at all. The -- the death in the -- of the world lies in these guys and I've discussed it in great detail in the book. You know, China is obviously the big one, but there's plenty of other really important stories.

QUEST: Do you see the soft landing now in China?

The latest data very much geared toward that.

O'NEILL: Well, certainly the -- fascinating here, as well. There's so many interesting things in the first three days of the year.

The Chinese data has been a big positive surprise, suggesting very much a soft landing, that their own PMI bouncing back above 50. You have two days of market trading, Chinese markets down. So the Chinese market is worried about something.

I suspect, unfortunately, it's going to get more complicated, because the property market is definitely slowing, so there's going to be more fears about MPLs, so the whole hard landing thing will get more air time. I'd be amazed if it didn't.

But people have to remember, Chinese house prices stopped going up because the policymakers deliberately did it. That's very different than the U.S. and Europe. And so they will turn the tap back on at some point when they're happy.

So soft landing.

QUEST: Of the three -- of the four BRICS that you are best known for, is it India or is it Russia that gives you most cause for concern?

(LAUGHTER)

O'NEILL: Yes. Only for those two.

QUEST: India...

O'NEILL: Well...

QUEST: -- India has got bigger problems than Russia.

O'NEILL: India -- India is the one that really gives me bigger concern, because if India got things right, India could be so much more of a positive for everyone else in a way that China is today. And some of the stuff I've done between 2020 and 2030, India could be the single most important economic driver of the world.

QUEST: Good, good, good, good...

O'NEILL: No it could be.

QUEST: Could have, should have, would have.

O'NEILL: Yes, could have, should have, would have.

Of course, even though they ended a dismal year on a really bad note, India itself has come up with a nice little new year's present, allowing foreign investors to get involved.

QUEST: I opened your book just at random.

O'NEILL: The best thing to do.

QUEST: I always take it -- page 201.

O'NEILL: Eat that sugar (ph).

(LAUGHTER)

QUEST: This sums up everything, doesn't it?

"It is vital not to get emotional about the BRICS, but rather to consider them as clinically as one would any other investment opportunity."

O'NEILL: Oh, yes. I think that's right. That's right.

QUEST: And in that -- in that spirit, you say that's still where asset allocation should go?

O'NEILL: Oh, with a -- it is -- it is the structural story of our generation. In -- in the next twelve months, these four guys together -- even with China slowing -- will effectively create, in dollar terms, another Italy in one year. And we all spend all day in Europe thinking about Italy being the only thing that matters.

In another three years, collectively, they will be bigger than the US. So one way or another, they're going to drive all our destinies this decade.

So, yes, of course, more -- more and more money should be going toward them.

(END VIDEO TAPE)

QUEST: You can get access to Jim O'Neill's views. This is his latest book. It's called "The Growth Map: Economic Opportunity in the BRICS and Beyond." It's by Jim O'Neill, who, of course, it's always good to hear his views on this program.

Also excellent to hear the views, Karen Maginnis at the World Weather Center.

That wind just won't go away.

KAREN MAGINNIS, ATS METEOROLOGIST: It has really been quite impacting many sections of northern and western sections of Europe. These back-to- back systems are really wreaking havoc.

And by the way, as I point this picture out, this view coming from Sweden, Southwestern Sweden, Malmo, not a wise idea to take pictures when the waves are crashing onshore. And every once in a while, you could get a rogue wave that could really present a big disaster.

And in Netherlands, we are looking at the rain that has piled up, and, as a result, has produced some severe flooding in some regions, especially those low lying areas around the Binnelacs (ph). But not just on the ground, but in the air, as well. But in between, we'll tell you about the wind.

And just to the southeast of Brussels, Belgium, 122 kilometers per hour. I looked at many, many reports of wind gusts and many reports of 100 kilometers per hour and above at a number of reporting stations, all the way from England and Scotland into France and across the Binnelacs (ph) region.

And into the Scottish -- the Scottish highlands have also reported some very high winds, as well.

What about the airports?

Well, we're seeing significant delays, for the most part, Glasgow, Amsterdam, Dublin. I looked to Schiphol Airport. Delays there running around 45 minutes to one hour. And Sofia is looking at some snowfall. It could be heavy at times, reducing visibilities. And right now, we're anticipating two plus hour delays.

But it's not just there. Many sections of Eastern Europe will see snowfall and significant snowfall over the next 48 hours, from the Alps to the Carpathians, extending northward and northwestward into Russia, right around St. Petersburg, also into Moscow, Latvia, Lithuania, Estonia looking at snowfall amounts there with a big chill on the way.

Why?

Back-to-back systems that have impacted this region with the high winds.

Well, it's -- mainly it's driven by the jet stream. And the jet stream is -- usually it waves back and forth. It's been stuck here. And as a result, these storms just kind of ride this path over and over and over again. If we get a big dense polar air, that will drive this a little bit further to the south.

But it looks like, Richard, that's not going to happen anytime soon, so the storms will keep coming -- back to you.

QUEST: Karen Maginnis at the World Weather Center, we thank you for that.

And that is QUEST MEANS BUSINESS for tonight.

I'm Richard Quest in London.

Whatever you're up to in the hours ahead, I do hope it's profitable.

Stay tuned. MARKETPLACE EUROPE is next with our interview with Professor Otmar Issing, one of the architects of the euro. That's next.

(COMMERCIAL BREAK)

QUEST: Hello and welcome to MARKETPLACE EUROPE.

I'm Richard Quest, this week reporting from the Berlaymont, the headquarters of the European Commission.

Here, they will be starting 2012 with an economic hangover, as they try and work out how to run a two speed Europe with a growing north-south divide.

What does that mean for doing business in the Union?

(BEGIN VIDEOTAPE)

QUEST (voice-over): In this week's FaceTime, I sat down with one of the architects of the euro, the German economist, Professor Otmar Issing.

And Juliet Mann spoke to the Italian industrialist, Alessandro Benetton, the chief exec of the global clothing retailer, who says forget talk of divisions in Europe, Germany needs Europe as much as Europe needs Germany.

(END VIDEO TAPE)

QUEST: At the center of all the difficulties in the European Union at the moment and you find the euro, which is also at the heart of doing business in the single market. I traveled to Germany to meet Professor Otmar Issing, one of the original architects of the euro, a man who knows the hopes and the dreams and can also tell us where it went wrong.

(BEGIN VIDEOTAPE)

QUEST: When you designed the euro, you were there, weren't you?

PROFESSOR OTMAR ISSING, ECONOMIST: Yes.

QUEST: You were there?

ISSING: Yes, I was a member of the first board of the European Central Bank.

QUEST: Did anybody say, we are constructing a ticking time bomb unless they start moving their economies closer together?

ISSING: I would not call it a time bomb. But I've called it an experiment. I was very critical that this could work before it started. So this didn't happen in the dark of the night. It happened in the light of the day.

So a crisis, I think, was in the pipeline.

QUEST: Were the politicians just not listening?

ISSING: The politicians behaved as they almost always do. Take one example. When the Spanish housing market was overheating, the ECB, Banco de Espana asked the national -- the government to do something against it. They didn't.

Why?

Because it would have been unpopular.

QUEST: But if this was known...

ISSING: Yes?

QUEST: -- and this was a crisis that was well -- or was -- that was waiting to happen...

ISSING: Yes?

QUEST: -- then surely solving it is going to take so much pain and so much angst to put this thing right.

ISSING: Yes, because the longer you wait, with approaching problems, the -- the bitterer the medicine. This is, I think, like in -- in personal life.

QUEST: Which doesn't bode well for any agreement to actually, long- term, address the problem.

ISSING: I would not go so far. I think strengthening the pact have - - to have national roots -- I -- I think this is key. The problems were cause at the national level. The problems have to be solved at the national level.

QUEST: While some are very much beating up on the markets, you're basically saying the markets have a role to play in keeping them honest.

ISSING: Absolutely. Absolutely. And markets have failed for many, many years. Italy, Greece, even Greece had showed the same -- almost the same low -- long-term interest rate as countries like Germany.

So this was a -- a market trailer. And this was not repeated. For me, the question was all this and Greece was told time and again, next time you don't get money anymore, if you don't deliver.

QUEST: You would have preferred to have seen Greece being allowed to go rather than being bailed out.

ISSING: I question if Greece should have got money time and again. And if they would not have got more money, they would have to decide what to do.

QUEST: So a Greece default, long-term, for the survival and savior of the euro, would have been a preferable option?

ISSING: All in all, I -- I think so. It would have made clear that this is a club. If you have a club of non-smokers and some of those members are starting smoking again, what would you do in the club?

We're saying we make it -- turn it into a smokers club?

QUEST: But your fundamental point is against the ECB becoming further involved?

ISSING: Yes, basically yes. There might be situations in which it's a question of crisis situation, etc. But as a permanent measure, I think this involves the ECB in politics and a central bank being involved in politics means finally it's kept in political games in give and take relations, which is not the role a central bank should take.

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QUEST: Professor Otmar Issing, who would no doubt approve of this statue called Hope.

Talking of hope, after the break, the chief exec of Benetton says don't row the southern countries out of the boat, teach them to behave properly.

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QUEST: This is the main press briefing room at the European Council. Here the officials try to put forward a united front. It's something chief executives are now starting to also believe is the way forward.

The chief executive of Benetton, Alessandro Benetton, says that as far as business is concerned, it's not a good idea to split north from south.

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JULIET MANN, CNN CORRESPONDENT (voice-over): Famous for their meticulously folded knitwear brights, clothing chain Benetton fell out of those about 10 years ago, facing major competition from the rise of cheap, fast fashion. Then, MBA and investment banker, Alessandro Benetton, rejoined the family firm to reactivate the brand.

He thinks perhaps the EU should take note.

ALESSANDRO BENETTON, CEO, BENETTON: Italy has 90 percent of its economy based on small and medium sized entrepreneurs. Now, if the cost of the money is too high for the bank, it will end up being not accessible to the small entrepreneurs. And that can be very dangerous, even if, on the other hand, we have a very strong entrepreneurial culture, which can balance that off. We are socially active as a country. There is the safety net of the families that guarantee us.

MANN: Families like his, Italian dynasty, Benetton. But the Eurozone is anything but one big happy family. One of Angela Merkel's closest allies has said Europe is speaking German now, a strong indication that EU countries follow Berlin's lead.

BENETTON: If Germany thinks that it can do it by itself without Europe, I think it's wrong, because the critical mass that is needed in order -- and I'm talking as an entrepreneur -- in a global market, critical mass is important. And -- and Germany needs Europe, just as much as Europe needs Germany.

MANN: People often talk about there being a north-south divide in Europe and the current economic crisis has widened that divide.

Where do you think Italy fits in now?

BENETTON: If you want to make a (INAUDIBLE) statement, then now clearly the southern countries are -- are producing less at the moment. But rather than, you know, throwing them out of the boat, I think we should make sure that we encourage them to behave in the proper manner.

We need to be practical and faster to make Italy be -- to be proud of them being founding partners of the European community.

MANN: It sounds to me that you're saying that Italy and Europe should talk its way out of the debt crisis.

BENETTON: Sure.

MANN: Surely that's not enough.

BENETTON: Italy has a very strong balance sheet, individuals and families.

Do we have a project for growing, because, you see, we have an aging population, fortunately, that is healthier. And -- and so you have a pension system that needs to be financed by a younger generation that by one third is not either working or studying.

That's what needs to be addressed. It's an inconstatement (ph) issue. It's putting the economy back on track for growth. The issue is not whether we'll be able to pay the -- the -- a company that grows, that has a business model that is successful will always pays its debts. It's just a matter of time.

MANN (voice-over): But time is money. Just ask the markets. In the brutal business of fashion, one season you're in, the next you're out. Perhaps it's just as well that the EU does not function that way, too.

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QUEST: Before we go, some sobering Europe by numbers. The economic projections for Europe in 2012.

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QUEST (voice-over): The GDP figures for countries like Germany and France are hardly impressive. But there will be growth, albeit under 1 percent. However, for the southern countries like Italy and Greece, their economies are in recession and will contract by up to 6 percent.

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QUEST: Perhaps a stiff drink is needed after that lot. But don't worry, we'll be here throughout the year to keep you informed about the business of Europe. And you can keep me informed about your business. The e-mail addresses, quest@CNN.com.